The Aavishkaar social investing firm was founded by Vineet Rai in 2001 in India. It is India’s biggest firm, by fund size, for this type of investing, which looks for investments that will have a social impact along with a financial return. Since its founding, Vineet and his team have made 46 investments, all in India, through four funds and have about $155 million under management in the country. It has already done thirteen exits and six partial exits.
But Aavishkaar’s recently launched fifth fund, the Aavishkaar Frontier Fund (AFF), is its first fund to focus outside India. The AFF will invest in firms in South and Southeast Asia, including countries such as Bangladesh, Indonesia, Pakistan and Sri Lanka. Of these countries, Indonesia is clearly the lead target market. Vineet hopes that AFF will invest about 35% of its $45 million in funds into Indonesia. The AFF states that it is the first venture firm from India to invest in Indonesian startups, with a special focus on impact investing.
“I am very excited about Indonesia because like India, Indonesia is also a country with high density, low income population where entrepreneurial activity exists. Indonesia today is what India was in 2007,” says Vineet, 43. “While Pakistan, Bangladesh and Sri Lanka share the border with India, Indonesia’s size will give it a competitive advantage.” Just last month, the AFF made its first investment, into Indonesian seafood company Bali Seafood International, and its next investment in Indonesia is already in the pipeline and expected to close in the next six months. Vineet also expects the AFF to close two other investments in Sri Lanka and Bangladesh in the next two months.
The investment approach of Aavishkaar is to look for investments in sustainable businesses that can generate employment, especially for low-income or underprivileged communities (also known as bottom of the pyramid, or BOP communities). This type of impact investing tries to channel funds where they will have the maximum beneficial impact on the BOP. The investments can be in any sector—healthcare, education, sanitation, agricultural or other areas. Unlike a traditional venture capital firm, Aavishkaar is willing to accept lower returns if it feels there’s a social good to the investment.
Vineet was inspired to do this from personal experience. Trained in forest management, Vineet worked for almost four years in the remote forests of India where, for the first time, he saw poverty up close in rural India. This experience created a burning desire to reduce poverty through job creation. Vineet soon realized that to create jobs, one needs to have sustainable businesses, in addition to the right skill set and talent, to make a difference. “The idea was to have capital, and the talent to bring about a change,” says Vineet. Vineet’s relationship with Indonesia goes back to 2005, where he came to help the tsunami victims of Banda Aceh.
In India, Aavishkaar’s four funds are invested in various businesses such as in agriculture, education, energy, handicrafts, healthcare, water and sanitation, technology, and microfinance. Some of its notable portfolio companies in India include Vaatsalya, a low cost Indian hospital chain; Milk Mantra, a dairy company that sources from small farms; and Equitas, a microfinance institution, which is set to go public in 2016. In some cases the fund has also been a seed investor. Their typical investment size is wide, and can be anywhere from $500,000 to $6 million, with a lock-in period of about eight years.